Question

Use the following information to answer the questions below.

CATERPILLAR INC. Statement of Income for a Recent Year

Total sales and revenues ...................................................................................... $55,184,000

Less: Cost of products sold ................................................................................... $40,391,000

Gross profit .......................................................................................,.................... $ 14,793,000

Less: Operating costs :

Selling, general, and administrative expenses ................................................ $ 5,697,000

Research and development expenses ............................................................ $2,135,000

Other operating expenses ............................................................................... $1,633,000

Total operating costs ............................................................................................. $ 9,465,000

Operating profit ..................................................................................................... $ 5,328,000

Less: Other expenses ............................................................................................ 245,000

Consolidated profit before taxes .......................................................................... $ 5,083,000

Provision for income taxes .................................................................................... 1,380,000

Profit of consolidated companies ......................................................................... $ 3,703,000

WAL-MART STORES, INC.

Statement of Income for a Recent Year Value

Total revenues ....................................................................................................... $485,651,000

Less: Cost of sales .................................................................................................$365,086,000

Gross profit ............................................................................................................ $120,565,000

Less: Operating, selling, general. and administrative expenses ......................... 93,418,000

Operating income ................................................................................................. $ 27,147,000

Less: Interest expense, net ................................................................................... 2,348,000

Income from continuing operations before income taxes ................................... $ 24,799,000

Provision for income taxes .................................................................................... (7 ,985,000)

Income from discontinued operations, net of tax ................................................ 285,000

Consolidated net income ...................................................................................... $ 17,099,000

SOUTHWEST AIRLINES CO.

Statement of Income for a Recent Year

Operating revenue:

Passenger ......................................................................................................... $ 17,658,000

Freight ............................................................................................................... 175,000

Other ................................................................................................................. 772,000

Total operating revenue ................................................................................... $ 18,605,000

Less: Operating expenses:

Salaries, wages, and benefits .......................................................................... $ 5,434,000

Fuel and oil ....................................................................................................... 5,293,000

Maintenance materials and repairs ................................................................. 978,000

Aircraft rentals ................................................................................................... 295,000

Landing fees and other rentals ........................................................................ 1,111,000

Depreciation and amortization ......................................................................... 938,000

Acquisition and integration .............................................................................. 126,000 .

Other operating expenses ............................................................................... 2,205,000

Total operating expenses ................................................................................. $ 16,380,000

Operating income ................................................................................................. $ 2,225,000

Other expenses (income):

Interest expense ............................................................................................... $ 130,000

Capitalized interest ........................................................................................... (23,000)

Interest income ................................................................................................. (7,000)

Other (gains) losses, net ·······································'··········································· 309,000

Total other expenses (income) ......................................................................... $ 409,000

Income before income taxes ................................................................................ $ 1,816,000

Provision for income taxes .................................................................................... 680,000

Net income ............................................................................................................ $ 1, 136,000

ANSWER THESE QUESTIONS USING THE ABOVE INFORMATION:

1. List the major differences between the income statements shown for Catepillar Inc., Walmart and Southwest

2. Explain how cost-accounting data were used to prepare these income statements.

3. On the income statement for where would the ticket agents' salaries be shown? Where would the costs of the computer equipment used to keep track of reservations be included on the statement?

4. On the income statement for where would the cost of newspaper advertising be shown? How about the cost of merchandise?

5. Where would the salary of the brand manager who plans advertising for equipment be shown? How about the salary of a production employee? Where would the cost of the raw materials used in the company's products be included on the statement?

Answer 1

Ans:

1)The income statements for any companies depends on the nature of their business so that stakeholders of the companies gets Fair and true Position of the company.

In the company questions all the three companies are different kind of organization, Catepillar Inc. is a Manufacturing organizaton so its operations will be of Manfuturing of the goods and sale.

Walmart is a Trading organization so its operations will be of Purchase the Product from suppliers and sale.

Southwest is a Service based company so they will deal in Providing services.

• In a Manufacturing organization like caterpillar all cost related to manfacture of a product like Direct material, Direct labour, manufacturing overhead etc. are considered part of product cost and once the product is sold its treated as Cost of Product sold which is deducted from sales to arrive at Gross Profit.
• In a Trading Organization, the Amount paid to purchase the products to resale is considered as Product cost, once the product is sold its treated as Cost of Product sold which is deducted from sales to arrive at Gross Profit.
• Southwest is a Airline company which is an service organization and they dont deal in inventories so they will not be any cost of goods sold however they will be having cost of the service like Fuel, repairs etc. Operating expenses are deducted to arrive at Net income

2.)

Caterpillar	Using Cost accounting Data Product manufacturing cost is arrived. SO costing is used to calculate direct material, Direct labour and manufacutring overhead in the production process
Walmart	Using Cost accounting Data Product Purchase cost is arrived. SO costing is used to calculate Purchase price, cost incurred to bring the product to the premises.
Southwest	Using Cost accounting Data Aviation fuel consumed cost is arrived.

3)On the income statement for where would the ticket agents' salaries be shown in Salaries, wages, and benefits.

The costs of the computer equipment used to keep track of reservations be included in Depreciation and amortization in the statement.

4) On the income statement for wallmart the cost of newspaper advertising be shown in selling expensesand the cost of merchandise in Cost of Sales.

5) The salary of the brand manager who plans advertising for equipment be shown in Selling expenses.The salary of a production employee and cost of the raw materials used in the company's products be included  in Cost of goods sold (Product cost) in the statement